Deemed rent

[KWF]

Parents own a house which they do not live in, but instead allow their adult son and son's family to live in.

Son does not pay rent to parents, but does pay all of house expenses (ie: mortgage/taxes/insurance/etc).

Does this arrangement require parents to include Sch E deemed rent income and rental expenses on their personal tax return?

Or can parents consider this arrangement as a gift to son, and therefore not required to be reported on Sch E, or a 709 gift tax return (if under annual gift tax exclusion amount)?

[ATSMAN]

If the intention of the parents, owner of the house to allow their son to live and pay the expenses of the house, then it is personal use. Owner does not get to deduct any expenses on Sch E.

I would not worry about gift tax issues based on the facts you posted.

[ATSMAN]

The greater question is who (if anyone) is going to deduct the real property taxes and mortgage interest??

Chances are the MFJ Std. Deduction may be greater than itemizing. I am finding that with 80% of my clients whose mortgages are getting smaller by the year. The rest are limited by SALT!